Supreme Court wary of major change to software patent law

WASHINGTON (Reuters) – U.S. Supreme Court justices stepped gingerly into a raging debate over computer software on Monday, voicing concerns about vaguely defined patents but signaling they would avoid any radical change to existing law.

This may help tech companies fend off lawsuits filed by “patent trolls,” defined as companies that hold patents only for the purpose of suing firms seeking to develop new products, but not as much as a broad ruling would.

For companies holding many patents, such as IBM Corp, a narrow ruling from the court would be better than a broader decision that tightened patent eligibility.

From their questions during an hour-long oral argument, the justices appeared likely to rule, as expected, that patents held by Australian company Alice Corp Pty Ltd for a computer system that facilitates financial transactions were not patent eligible. CLS Bank International, which uses similar technology, challenged the patents in 2007.

Although some of the nine justices signaled a willingness to go further and provide new guidance to lower courts that would describe exactly what types of computer-implemented inventions were patent eligible, others suggested there was no need for so broad a ruling. A ruling is expected by the end of June.

If the court were to avoid any major pronouncements, the outcome could mirror a 2010 case, Bilski v. Kappos, in which the court was expected to offer guidance on business method patents but eventually issued a relatively narrow 9-0 decision.

COMPANIES WATCHING CLOSELY

Chief Justice John Roberts questioned whether a proposed test, suggested by Solicitor General Donald Verrilli on behalf of President Barack Obama’s administration, would make the complex issue any clearer.

“I’m just doubtful that’s going to bring about greater clarity and certainty,” Roberts said of the proposal.

“Why do we have to … reach software patents at all in this case?” she asked Verrilli.

The case is being closely watched by a broad swath of companies in the technology sector and beyond.

Google Inc, Dell Inc, Verizon Communications Inc, Microsoft Corp, and Hewlett-Packard Co were among a large list of companies that filed friend-of-the-court briefs in support of CLS. A smaller number, including engine manufacturer Cummins Inc, supported Alice, while others, like IBM, supported neither side.

Companies vary over what kind of eligibility threshold they would prefer. Those that often get sued for patent infringement, such as Google, favor a tighter definition. Those that want to protect their many patents, such as IBM, would prefer that most software be patent eligible.

LOWER COURT SPLIT

In May 2013, the U.S. Court of Appeals for the Federal Circuit in Washington, D.C., ruled for CLS but the judges were split 5-5 on which legal test to adopt.

On the patents contested in the case, several justices, including Anthony Kennedy and Ruth Bader Ginsburg, suggested they appeared to be too abstract to be eligible for patents. Previous Supreme Court rulings have said abstract ideas are generally not eligible for patents unless the inventor shows a way of applying the idea.

Making references to ancient Greek inventor Archimedes and other historical figures, Justice Stephen Breyer was one of the court members who appeared keen on a ruling that would have broad application.

On the one hand, he noted, patent eligibility that is too broad creates monopolies and reduces competition down to “who has the best patent lawyer.” On the other hand, if patent eligibility is too strict, it could “rule out real inventions with computers,” he added.